I’ve got a mate who went broke. It’s sad really, because he is a very talented chef and he deserves to do well, but he made some basic mistakes and paid dearly. He and his wife bought an established gourmet takeaway/delicatessen in one of Melbourne’s trendy suburbs. They proceeded to develop a range of innovative and appealing gourmet products with the intention of getting rich quickly. My friend is a craftsman in the kitchen and threw himself into the task with great gusto. The place was soon full of delicious offerings.
It’s very difficult to run a hospitality business from back-of-house
He stayed where he was most comfortable — in the kitchen — and only ventured out into the front-of-house when necessity dictated. No one really managed the sales or service functions, they kind of bumbled along. No signs, labels or pricing on anything; scruffy staff; badly handwritten notices everywhere.
It’s not that you recoiled with horror when you went in there, it wasn’t as bad as that; but it did slowly deteriorate over time as the couple became comfortably familiar with their surroundings. Familiarity breeds contempt.
Accounting? What’s that?
I was grimly amused by their accounting system — it was rudimentary to say the least. I doubt whether they established a proper profit and loss during the whole three years they were there. Money was just grabbed from the till whenever cash was needed for any purpose. Does this sound familiar?
Surprisingly, the business made a profit for a while, but didn’t show any growth. They just put the prices up whenever they felt expenses were creeping up on income. Slowly they priced themselves out of their market, or more accurately, they had falling standards and rising prices.
Procrastination can ruin your business
Procrastination eventually killed the business. They forgot to renew the lease and the owner served them with an eviction notice to allow redevelopment of the site. They couldn’t afford to move and were forced to fold.
I watched the whole process with mounting horror and tried several times to help, but there is an irony in my business: if you charge somebody $2000 per day, they hang off every word; but if you give free advice, nobody listens — including them. I wasn’t alone in making suggestions, but being critical of someone’s business is like criticising their baby. It tends to provoke all kinds of defensive reactions.
Somehow, I don’t think they are a rare example in this industry; there are thousands of small businesses being run by the seat of the pants, and a lot of them will come to a tortured demise.
By the way, my friend is now working as an executive chef for a medium-sized hotel. He told me he’s going to do a thorough apprenticeship in management, then start another business. I think he might approach the next one differently.